Canadian Securities Course (CSC) Level 2 Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

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Question: 1 / 400

What strategy involves exploiting inefficiencies or arbitrage in hedge funds?

Event driven - unique events such as merger.

Relative value - buy in one market sell in another.

The correct answer is B. Relative value strategy involves buying securities that are perceived to be undervalued and selling securities that are perceived to be overvalued, with the intention of profiting from the price movements of these securities in relation to each other. This strategy exploits pricing inefficiencies in the market and is commonly used in hedge funds to generate returns.

Option A, event-driven strategy, involves capitalizing on unique events such as mergers, acquisitions, or other corporate events. Option C, directional strategy, focuses on predicting the general movement of the market or specific securities. Option D, the statement about hedge funds specializing in long-term growth strategies is not accurate as hedge funds use a variety of strategies, including both short-term and long-term approaches.

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Directional - movement of market.

Hedge funds specialize in long-term growth strategies.

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